The Mumbai Metropolitan Region Development Authority (MMRDA) is Mumbai’s nodal town planning body, responsible for the execution of several big ticket infrastructure projects including the likes of the Mumbai Metro. But lately, the MMRDA has been finding it tough to generate revenues with the ongoing real estate slump taking a toll.

TDR Auctions Take A Hit

The MMRDA funds its infrastructural projects through two major sources. The first if through the auction of ‘Transfer of Development Rights’ (TDR) and the second, is by auctioning of their land parcels in Bandra Kurla Complex (BKC) and Wadala. With land in BKC scarce, there is always interest for the MMRDA’s auctions, however -when it comes to TDR, the agency has not had much success.

In a recently held auction, the MMRDA released over 86,000 square meters of TDR to fund its projects, with TDR being made available in areas like Jogeshwari, Vikhroli, Ghatkopar and Goregoan. The reserve price was set at a little over Rs. 36,000 per sq meter . The agency hoped to generate at least Rs 315 Crores from the auction, but the response was disappointing with only about 17% of the total amount being sold. The MMRDA only managed about Rs. 55 Crores, making this the second time that the agency has received a poor response for its TDR auction.

Developers Say TDR Prices Are Too High

The MMRDA feels that poor response is a result of Bombay high court’s blanket ban on starting up of new constructions and BMC’s new DCR rule. “BMC is in the process of coming up with its new DCR rules. In case BMC decides to grant more Floor Space Index (FSI) then developers will be more interested in buying the additional FSI rather than the TDR, “says Anil Wankhade, Deputy Metropolitan Commissioner of the MMRDA.

However, developers disagree with many feeling that the MMRDA’s reserve prices are too high . “If you have reserve price which is very high and bench-marking to a past market scenario unlike now, clearly there won’t be any takers. Now MMRDA has to ensure that the plot actually gets traded”, says Ashish Shah, COO of Radius Developers.
In its defense, the MMRDA claims that its rates are in sync with the market. “I don’t agree that our reserve prices were too high. In fact, as far as the rate is concerned we have received good rates ranging from Rs. 37,000 to Rs. 39,000 per sq meter. Of course the highest rate received was for the less quantity and that’s the reason we could not exhaust the entire quantum of TDR which was out for auction”, says Anil Wankhade.

TDR Costs May Be Passed Onto Homebuyers

While MMRDA and developers fight it out amongst themselves, it is the homebuyers who are set to be affected by it. Expensive TDR means developers will shy away from buying it, or pass on the costs to home buyers. The lack of government TDR in the market may also lead developers to buy it from private sources. In the past, there have been complaints of cartelisation of TDR with a few bid developers monopolizing supply. If that happens, the MMRDA will continue to see low interest for its TDR, which in turn will lead to loss of momentum for its various infrastructure projects.

However, there is still hope. “Here the situation is such that both buyer and the seller is under stress due to overall market scenario. But I think in the due course of time the market will recover. It might not happen immediately. But at least in next six months or little further down the road the transactions might happen.” says Arvind Nandan, Director, of Valuation and Advisory at Colliers International.

One can only hope for the best. Both the MMRDA and developers must strike a balance that will eventually benefit the city and the sector.

Reporter: Ashwini Priolker, NDTV
Web Editor: Nikhil Narayan Sivadas, NDTV